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Are Good Industrial Relations Good for the Economy?

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Author Info

  • John T. Addison

    (QueenÕs University Belfast (U.K.) and GEMF, Portugal and The Rimini Centre for Economics Analysis, Italy.)

  • Paulino Teixeira

    (Universidade de Coimbra, Portugal and GEMF, Portugal)

Abstract

Using international data, we investigate whether the quality of industrial relations matters for the macro economy. We measure industrial relations inversely by strikes Ð which proxy we cross-check with an industrial relations reputation indicator Ð and our macro performance indicator is the unemployment rate. Independent of the role of other institutions, good industrial relations do seem to matter: greater strike volume is associated with higher unemployment. But these results apply in cross section. Holding country effects constant, the sign of the strikes coefficient is abruptly reversed. Although it does not seem to be the case that the line of causation runs from unemployment to strikes once we control for the endogeneity of strikes, it is also the case that support for the strikes proxy for industrial relations quality is much eroded.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 28-07.

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Date of creation: Jul 2007
Date of revision: Jul 2007
Handle: RePEc:rim:rimwps:28-07

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Keywords: strikes; industrial relations quality; unemployment; labor market institutions; cross-country data;

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References

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  1. Addison, John T. & Teixeira, Paulino, 2001. "The Economics of Employment Protection," IZA Discussion Papers 381, Institute for the Study of Labor (IZA).
  2. Belot, Michèle & van Ours, Jan C, 2000. "Does the Recent Success of some OECD Countries in Lowering their Unemployment Rates lie in the Clever Design of their Labour Market Reforms?," CEPR Discussion Papers 2492, C.E.P.R. Discussion Papers.
  3. Feldmann, Horst, 2008. "The quality of industrial relations and unemployment around the world," Economics Letters, Elsevier, vol. 99(1), pages 200-203, April.
  4. Krueger, Alan B. & Mas, Alexandre, 2003. "Strikes, Scabs and Tread Separations: Labor Strife and the Production of Defective Bridgestone/Firestone Tires," IZA Discussion Papers 869, Institute for the Study of Labor (IZA).
  5. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  6. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  7. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 6(4), pages 36-61, Winter.
  8. Morris M. Kleiner & Jonathan S. Leonard & Adam M. Pilarski, 2002. "How industrial relations affects plant performance: The case of commercial aircraft manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(2), pages 195-218, January.
  9. Addison, John T. & Schnabel, Claus & Wagner, Joachim, 2003. "The course of research into the economic consequences of German works councils," Discussion Papers 22, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  10. William Hauk & Romain Wacziarg, 2009. "A Monte Carlo study of growth regressions," Journal of Economic Growth, Springer, vol. 14(2), pages 103-147, June.
  11. John T. Addison, 2005. "The Determinants of Firm Performance: Unions, Works Councils, and Employee Involvement/High Performance Work Practices," GEMF Working Papers 2005-03, GEMF - Faculdade de Economia, Universidade de Coimbra.
  12. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  13. Harry C. Katz & Thomas A. Kochan & Kenneth R. Gobeille, 1983. "Industrial relations performance, economic performance, and QWL programs: An interplant analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(1), pages 3-17, October.
  14. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  15. Alan Harrison & Mark B. Stewart, 1993. "Strike Duration and Strike Size," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 830-49, November.
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Cited by:
  1. Addison, John T. & Ozturk, Orgul Demet, 2011. "Minimum Wages, Labor Market Institutions, and Female Employment," Economics Series 278, Institute for Advanced Studies.

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